The Future of Fox's Century City Lot Is Secure, At Least For Now

Once redundancies are identified and layoffs announced, will keeping the 53-acre lot in its current state make financial sense?

How many daily employees are required to make good business sense out of a 53-acre studio lot? It’s a question that former Fox employees — now employees of the Walt Disney Company — are likely asking themselves in the aftermath of Thursday’s blockbuster deal.

Fox said it plans to lease its Century City lot back to Disney for the next seven years as part of the $52 billion deal in which Disney acquired Fox’s film and television assets, much of which is centered on the lot. This lease agreement would seem to make sense for both companies; Disney can avoid disrupting the dozens of projects that are currently shooting on the lot and Fox gets to maintain ownership while gaining a new reliable revenue stream likely to be in the tens of millions of dollars annually.

Furthermore, Disney’s Burbank lot is 51 acres and its lease with Fox now gives them a presence on L.A.’s Westside for the next seven years, with access to additional sound stages, television production and programming facilities, executive offices and support facilities. (The Fox lot has about 1.8 million square feet of building space.) Fox’s film studio alone employs about 3,200 people.

But what remains unclear is how many of those production facilities and how much of that office space Disney will ultimately need.

A recent report from MoffattNathanson analyst Michael Nathanson estimates that there are $2.5 billion in cost synergies between the two companies and in his letter to employees, Rupert Murdoch suggested that layoffs in the coming months were more or less inevitable.

“We are deeply committed to finding opportunities for our people as well as ensuring that anyone impacted is well taken care of,” Murdoch wrote. As the overlap and redundancies become clearer, Murdoch may end up looking extremely savvy for executing a lease that generates revenue for seven years for a parcel of land that has limited short term options for alternative development.

A local zoning law that applies specifically to Century City requires that any new developments must meet a “net zero traffic increase” requirement which would make getting approval for any new mixed-use commercial developments extremely challenging.

And then there is the question of the historic value of studio lots. According to Ken Bernstein, the manager of the L.A.’s Office of Historic Resources, the Fox lot has “significant historic architectural and character” value. A 1994 preservation plan identified 59 structures of historic significance on the lot. That plan proposed preserving 46 of those structures.

“Clearly if there is going to be future development of the site and it involves potential demolition of some structures, that preservation plan would need to referenced and updated,” said Bernstein.